The appraisal is the lender’s way of determining a realistic market value of your future home. In other words, it’s the lender’s way of ensuring the home is actually worth the price you’ve agreed to pay for it.
In the unfortunate event that you can’t pay your mortgage, the bank will foreclose on the home and resell it. Not a nice thought – but it’s reality. The appraisal is how the lender protects its own financial interests.
Generally, you’ll have little control over the appraisal process and won’t even be present for it. Your lender will arrange the appraisal, and the house will either appraise at the asking price or not. Hopefully the former.
If the home appraises for less than the asking price, you have two options. You can come up with the difference, or the seller can reduce the asking price to match the appraisal.